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TIAA-CREF takes stake in Billabong amid buyout interest

6 Feb 2013

US life and health insurer TIAA-CREF has bought a minority stake in Billabong, which comes as the Australian surfwear brand weighs competing private equity bids for the business.

The New York-based investor bought 25 million shares on 4 February through its TIAA-CREF Investment Management and Teachers Advisors units, equivalent to a 5.2 per cent stake in the business, according to a regulatory filing.

The deal, which consisted of a number of share acquisitions between October and February, makes TIAA-CREF the fifth-largest shareholder in Billabong.

TIAA-CREF manages about $502bn in retirement funds for about 3.7 million teachers and other public service workers, according to its website.

Shares in Billabong closed at A$0.96.5 today, giving the company a market value of $394m.

Last month San Francisco buyout house Altamont and North Face owner VF Corp partnered for an A$556m ($588m) bid for Billabong, which matched a rival offer from the company’s US director Paul Naude and fellow US private equity firm Sycamore Partners.

Naude and Sycamore revealed their A$1.10 per share offer in December backed with debt financing from Bank of America Merrill Lynch – the same day Billabong issued its third profit warning in a year.

The news followed TPG Capital’s withdrawal of an A$694m ($714m) bid for Billabong in October, a move that caused the beleaguered Australian surfwear brand’s shares to plummet to a record low.

TPG’s walkout followed drawn-out discussions over the sale of Billabong, which in September revealed that one of two suitors to buy the company, thought to be Bain Capital, had pulled out of takeover talks, leaving TPG as its sole remaining bidder.

A structural review released in March revealed the business – which operates through a global network of 677 stores – plans to close between 100 and 150 loss-making and under-performing outlets to reduce rent expense and increase EBITDA, resulting in the loss of around 400 jobs.

Australian consumer companies have recently struggled under the weight of a strong Australian dollar, high interest rates and cost-conscious consumers, attracting interest from private equity firms.

Australian surfwear rival Rip Curl last year said it had also received unsolicited takeover approaches from several international companies.